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Real Estate Investments in Japan

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How I got started in Japan

I am often asked how I built a multi-million dollar real estate portfolio in Japan from my base as an English teacher. When I bought my first property it was in Australia and I was 38 and the year was 1995. I used an AUD8,000 deposit to get going. I needed my investments to provide real earnings. That first purchase did well and led to several more over the years.
I bought everything through one man, one professional, his name is Justin. The Australian market started to soften and I believed the Japanese market was set to move after 13 consecutive years of recession. I sought advise from one man in Japan, his name is Hirayama, the same man, real estate agent I rented my first classroom from. Seven years and more than 40 classrooms later I asked him for help to buy my first piece of investment real estate in Japan.
I purchased my first Japanese real estate investment in 2002. Slowly, Mr. Hirayama introduced me to others, architects, builders, engineers, zoning officers, city planners, appraisers, accountants, lawyers, and other investors to mention a few. In short he let me into his network of professionals. More and more I liked what I was learning from these men so I called Justin and asked him to sell me up in Australia and that's exactly what he did. I didn't even leave Japan and he sold the lot. I made a small fortune in capital gains, more cash than I had ever held at one time. Justin handled the lawyers, sale, tax accountant, banking, payment of all final bills, and receipt of all final incomes. A true professional I trusted and am very glad I did. Today Hirayama and his network have helped me continue to re-invest those profits here in Japan. Today I am part of his network and talking to you.

Knowledge

When I look at all I have learned over the years one things stands out. Knowledge is needed. I look on with sadness as I see hoards out buying their first home and listening to the well polished sales pitches, pitches that will hook those buyers up to a bad real estate investment for 30 years.
I look on in fear as I watch those who have read the books and are out there after their first investment property, so many get ripped off and it happens everyday. I regularly get calls from people saying things like, "....how can you get so excited when you talk about 6% return on a spanking new building, I found a crummy old second hand building here at 13%." To this I simply ask them to go find a good real estate accountant and have that accountant explain how real estate depreciation works in Japan. The lack of knowledge within the ranks of 'investors' is truly frightening and wasteful. Waste need not happen. You just need to find the right professionals to trust and know they have the knowledge to keep you safe.

The right horse for the right course.

Professionals come with many specialties. Mine is being a member of a group of professionals and knowing who can answer you question. I also own a string of buildings here in Japan that I built from the ground up. Builders are not just builders. Some build homes, other build steel framed ARC clad apartment buildings, yet others are the best at full concrete multi level buildings up to 15 floors but will not go any higher, why? They know. Accountants are not just accountants. I run two companies here in Japan to do with English school franchises. The accountants I use for this work don't have a hope of getting my real estate work. For that I use a real estate accountant whose practice deals exclusively with building owners. Architects are not just architects, I ran up a proposal for a building in Osaka. I gave the same land to three architects as a test. Two I didn't know and my tried and tested Mr. Nakamura.
Mr. Nakamura came back and wiped the table with the other two proposals. It was difficult to fathom. Two architects came back with very similar designs; in particular they both offered a traditional approach to the emergency escape stair well. Nakamura made a very simply change to tradition, stayed within fire regulations and gained 13% more rentable space! Real estate agents are not just real estate agents. One can keep your investment real estate full with tenants and the other can found a great piece of land for that building to begin with it is rare to find one agent that is a specialists in both renting and selling land. They do exist but are few. Additionally the real estate market of Japan is such a deep and dense market agents become extremely parochial and territorial by necessity.
They look after theirs and don't share much information across borders. In my case whenever I find an agent in Tokyo that says he can find me a property in Osaka I walk away, I am sure he can find me a piece of real estate but it may well have been passed over by everyone in Osaka.

The right team.

I won't go into why every specialty is not just that specialty. Suffice to say you need a top team. You need to know if the team you find says they are good everywhere they probably aren't any good anywhere. You need to know your team is invested in your business; you need to see what they own themselves. You need to get evidence that your team is networked and is very good in their chosen area. You need to know your investment property will be a priority to their rental agents. You need their knowledge.

Food for thought I trust.

Mark.

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